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Dnevnik Daily

A new public institution will be set up in Bulgaria to manage and control amounts from all real estate transactions in an effort to bring them into the light and crack down on money laundering in the industry.

The new Deposit and Consignation Fund will be inaugurated by special legislation hammered out by the Ministry of Justice and the Notary Chamber.

The institution will be a state-owned enterprise and not a bank and will be modelled on a system already operational in France, said Notary Chamber head Dimitar Tanev. Under the scheme, the sellers will receive their money with a short delay but it will ensure transparency and security to all loyal parties as well as central and local authorities.

The system will see buyers transfer the money into the fund where it will spent two or three weeks before it is passed on the seller. The period will be used to check up the resource’ origin and charge all dues of the government and municipalities. It is expected to put an end to sham transactions and block cash payment as money will have to be put into the fund by a bank transfer, Tanev explained.

Market values in the different regions will be determined by experts and updated every three or four months. The price will serve as a reference point for actual property transactions to make sure money laundering and tax evasion is prevented. A difference within 10-15% could be assumed thanks to property improvements but current differences topping out at between 300% and 1000% will be impossible, Tanev said.

The Notary Chamber discussed the proposal with representatives of the European anti-fraud office OLAF, who said the project will indicate the country’s commitment to combat abuse and money laundering.

The rents of apartments in Sofia and Istanbul are almost the same. An apartment of 75 sq m in Istanbul rents for 431 Euros per month, while the same apartment in Sofia rents for 400 Euros per month. Renting in Instanbul, however, is better because tenants pay for the living are, while in Bulgaria, they also pay for the common parts.

Purchase prices of properties in Sofia and in Istanbul are also similar. A 75 sq m apartment in Instanbul sells for about 80 000 Euros, while in Sofia it sells for 78 400 Euros. The prices of larger apartments in Sofia, however, are by 20 000 Euros more expensive in comparison with Istanbul. An apartment of 120 sq m in Sofia costs 158 000 Euros while in the Turkish megalopolis it costs 123 100 Euros. The reason for this is the increased demand for bigger apartments in Sofia.

The number of the purchases will fall by more than 12% in comparison to 2008, according to analysts. Their number is expected to be about 263 000.

In 2008 the overall number of purchases have decreased by 7.8 % in comparison with 2007, totalling 300 100. According to the Land Registry the total number of new inscriptions in 2007 was 325 385.

Some analysts predict that more than 3000 from the existing 6000 estate agencies will go bankrupt. This means that 7000 people will lose their jobs. It is expected that mainly small estate agencies will close. From the big players, not more than 6% will go bankrupt. The workload of the brokers will fall and their monthly income is expected to be under 300 levs per month.

According to the National Statistics Institute the average area of a property is 63.82 sq.m. and the average price at the moment is 580 sq. m., meaning that the average price of the average apartment is 37015Euros.

The analysts expect that if property prices fall by 14.85%, the market will come back to life. This would mean a price of 493 Euros per sq. m. and 31 518 Euros for the price of an average size apartment 63.82 sq.m.

There is a big difference between the property prices officially declared on the Bulgarian market and the willingness of the buyers to pay them. The drop of the number of purchases of property in the last months of 2008 has lead to a new tendency – the buyers dictate the situation on the property market.

According to the official information in the last year Bulgarian property prices have increased by 22%, which has been wiped out by the decrease of the demand for properties by 20% for the same period.

From the beginning of 2009 there is a new trend – the higher proportion of the purchase price  the buyer can pay without a mortgage, the higher reduction of the final price he will get. January 2009 was the first month without foreign participation on the Bulgarian property market. There were no buyers from abroad – neither Bulgarians, nor foreigners.

Due to the recession, renting has become a more popular option than buying. The lack of stability and the uncertainty have forced people to avoid long term bank loans.  At the same time those who have bought a second home have started renting it and the properties for rent have increased by 20%. The highest increase in the number of the rentals was in Rousse – of 31% – while in Blagoevgrad this increase has been the smallest in the country – only of  5%.

In comparison with 2007, the highest increase of the property prices was in Plovdiv – 32% – where the average price in 2008 was 756 Euros/sq.m. The capital Sofia was in second place with increase of 30.13% and an average price of 1087.33 Euros per sq. m. Veliko Turnovo and Rousse share the third place with 27%.

The number of property purchases in Bulgaria has decreased by 40% in 2008 in comparison with 2007, and in the mountain ski resorts like Bansko, Pamporovo and Borovets it has reached a decrease by 80%, while at the Black Sea cost it is significantly less – by 30%.  This has lead to a price drop and in the resorts currently there are very cheap properties on offer.

At the same time in Sofia the decrease in the number of purchases is 33%, while in Plovdiv it is 50%. The smallest decrease is in Vidin, where it is only 15% in comparison with 2007.

This is mainly due to the recession in the last three months of 2008. Until October 2008 the purchase prices have been on average 26% higher than the ones in 2007.  The the market virtually went dead and it has not been possible to make real statistics of the prices, in some cases prices were 20% lower than in 2007.